Chaos in Spain puts Europe under pressure

Tensions rose in European markets today as Madrid declared it was ready to suspend Catalonia’s political autonomy within 48 hours.

Spain has been thrown into turmoil by the unrecognised referendum on the future of the nation’s biggest regional economy earlier this month, prompting Catalonia’s president Carles Puigdemont to call for talks with Spain’s leader Mariano Rajoy ahead of a formal declaration of independence.

Investors sold Spanish debt after Madrid confirmed it would trigger Article 155 of the constitution to suspend Catalonia’s autonomy on Saturday, pushing the nation’s benchmark 10-year borrowing costs from 1.61% to 1.65%. Spain’s IBEX main index also took a hit, falling almost 1%, with other European markets on the back foot.

ETX Capital’s Neil Wilson said: “The spat between Madrid and Catalonia will get worse and this ought to keep the pressure on the euro and European equities into next week.”

A surprise 0.8% drop in UK retail sales last month hit sterling today as signs of consumer fragility resurfaced amid the highest price rises in five years. The pound sank 0.41 cents to $1.3152.